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Income Taxes
 12 Months Ended
Jul. 29, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
(a)Provision for Income Taxes
The provision for income taxes consists of the following (in millions):
Years EndedJuly 29, 2023July 30, 2022July 31, 2021
Federal:
Current$3,754 $2,203 $1,959 
Deferred(1,955)(176)(203)
1,799 2,027 1,756 
State:
Current623 458 513 
Deferred(175)(156)(46)
448 302 467 
Foreign:
Current412 313 583 
Deferred46 23 (135)
458 336 448 
Total$2,705 $2,665 $2,671 
Income before provision for income taxes consists of the following (in millions):
Years EndedJuly 29, 2023July 30, 2022July 31, 2021
United States$14,074 $13,550 $12,335 
International1,244 927 927 
Total$15,318 $14,477 $13,262 
The items accounting for the difference between income taxes computed at the federal statutory rate and the provision for income taxes consist of the following:
Years EndedJuly 29, 2023July 30, 2022July 31, 2021
Federal statutory rate21.0 %21.0 %21.0 %
Effect of:
State taxes, net of federal tax benefit2.4 1.7 2.7 
Foreign income at other than U.S. rates(0.1)0.8 1.5 
Tax credits(0.3)(1.6)(1.4)
Foreign-derived intangible income deduction(5.8)(3.9)(4.2)
Stock-based compensation1.1 0.3 0.6 
Other, net(0.6)0.1 (0.1)
Total17.7 %18.4 %20.1 %
During fiscal 2023, we resolved certain items with the Internal Revenue Service (IRS) related to the audit of our federal income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016. As a result of the resolution, we recognized a net benefit to the provision for income taxes of $145 million, which included a reduction of interest expense of $53 million.
Foreign taxes associated with the repatriation of earnings of foreign subsidiaries were not provided on a cumulative total of $6.5 billion of undistributed earnings for certain foreign subsidiaries as of the end of fiscal 2023. We intend to reinvest these earnings indefinitely in such foreign subsidiaries. If these earnings were distributed in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we could be subject to additional income and withholding taxes. The amount of potential unrecognized deferred income tax liability related to these earnings is approximately $681 million.
Unrecognized Tax Benefits
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):
Years EndedJuly 29, 2023July 30, 2022July 31, 2021
Beginning balance$3,101 $3,106 $2,518 
Additions based on tax positions related to the current year159 157 224 
Additions for tax positions of prior years261 74 618 
Reductions for tax positions of prior years(265)(81)(122)
Settlements(1,063)(69)(93)
Lapse of statute of limitations(56)(86)(39)
Ending balance$2,137 $3,101 $3,106 
As a result of resolving certain items related to the IRS audit of our federal tax income tax returns for the fiscal years ended July 26, 2014 through July 30, 2016, the amount of gross unrecognized tax benefits in fiscal 2023 was reduced by approximately $1.1 billion. We also reduced the amount of accrued interest by $69 million.
As of July 29, 2023, $1.7 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized net interest expense of $27 million, $33 million and $74 million during fiscal 2023, 2022, and 2021, respectively. Our net penalty expense for fiscal 2023, 2022, and 2021 was not material. Our total accrual for interest and penalties was $523 million, $486 million, and $444 million as of the end of fiscal 2023, 2022, and 2021, respectively. We are no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2013. We are no longer subject to foreign or state income tax audits for returns covering tax years through fiscal 2003 and fiscal 2008, respectively.
We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. We estimate that the unrecognized tax benefits at July 29, 2023 could be reduced by $350 million in the next 12 months.
(b)Deferred Tax Assets and Liabilities
The following table presents the breakdown for net deferred tax assets (in millions):
July 29, 2023July 30, 2022
Deferred tax assets$6,576 $4,449 
Deferred tax liabilities(62)(55)
Total net deferred tax assets$6,514 $4,394 
The following table presents the components of the deferred tax assets and liabilities (in millions):
July 29, 2023July 30, 2022
ASSETS
Allowance for accounts receivable and returns$81 $90 
Sales-type and direct-financing leases22 29 
Inventory write-downs and capitalization452 430 
Deferred foreign income218 210 
IPR&D and purchased intangible assets1,082 1,184 
Depreciation16 10 
Deferred revenue1,801 1,744 
Credits and net operating loss carryforwards1,218 1,336 
Share-based compensation expense198 138 
Accrued compensation328 333 
Lease liabilities246 248 
Capitalized research expenditures2,042 149 
Other484 439 
Gross deferred tax assets8,188 6,340 
Valuation allowance(754)(834)
Total deferred tax assets7,434 5,506 
LIABILITIES
Goodwill and purchased intangible assets(602)(767)
Unrealized gains on investments— (26)
ROU lease assets(234)(237)
Other(84)(82)
Total deferred tax liabilities(920)(1,112)
Total net deferred tax assets$6,514 $4,394 
The changes in the valuation allowance for deferred tax assets are summarized as follows (in millions):
July 29, 2023July 30, 2022July 31, 2021
Balance at beginning of fiscal year$834 $771 $700 
Additions35 84 91 
Deductions(18)(10)(5)
Write-offs(93)(12)(16)
Foreign exchange and other(4)1 1 
Balance at end of fiscal year$754 $834 $771 
As of July 29, 2023, our federal, state, and foreign net operating loss carryforwards before valuation allowance for income tax purposes were $320 million, $879 million, and $524 million, respectively. A significant amount of the net operating loss carryforwards relates to acquisitions and, as a result, is limited in the amount that can be recognized in any one year. If not utilized, the federal, state, and foreign net operating loss carryforwards will begin to expire in fiscal 2024. We have provided a valuation allowance of $82 million and $10 million for deferred tax assets related to foreign and state net operating losses respectively that are not expected to be realized.
As of July 29, 2023, our federal, state, and foreign tax credit carryforwards for income tax purposes before valuation allowance were approximately $5 million, $1.6 billion, and $2 million, respectively. The federal tax credit carryforwards will begin to expire in fiscal 2026. The majority of state and foreign tax credits can be carried forward indefinitely. We have provided a valuation allowance of $594 million for deferred tax assets related to state and foreign tax credits carryforwards that are not expected to be realized.